fixer upper – Page 2 – TexasCashFlow.com

April 12, 2016April 12, 2016

Investing in Real Estate and Building Your Rental Portfolio

As you are thinking about investing in real estate and building your rental portfolio, you can no doubt find many wholesale property companies in San Antonio to sell you properties.

I am a San Antonio property wholesaler like others in some ways, but with me, you will find a key difference:

I built myself a large portfolio of rental investment properties (and owner financed investment properties) practically from scratch in about 5 years, from 2001 until 2006. If the person selling you properties has few to no properties, how much do they really know about what they sell?

When I first got started in San Antonio real estate investing, I did not have much capital, only about $25,000. In my first year in real estate, I did 50 houses – San Antonio flip properties.

I did that by finding $2 million in private money from a retired doctor and investor in San Antonio. He loaned me in the money in small parcels and I bought under market value $30,000 properties, rehabbed them, and flipped them for a $8000 profit, which we split.

I was able to make $100,000 in my first year in real estate investing, and I re-invested most of the profits into buy and hold rental properties.

Now I am in the position where I have a very large portfolio of buy and hold properties, and I really do not need anymore properties for myself. I like to help other small investors develop their own portfolios.

I run across many small real estate investors in California that want to build a rental property portfolio but are priced out of their current market. I specialize in helping these investors maximize their available cash so that they can buy enough rental properties so they can quit their jobs within a few years.

Here is a typical real estate investing scenario I see:

California investor with a good $200,000 per year job and $100,000 cash or equity cannot buy anything in CA worth having.
He has steady high tech employment and good credit.
I recommend that you buy an under market value San Antonio investment property for cash at $70,000.
We do $35,000 in rehab on the fixer upper property. I make it really nice – with central air, tile, lighting, granite, really make it shine.
We then rent it out section 8 for the investor for approximately $1295 per month – ARV is about $139,000.
After the house is rented, the investor from California can cash out refinance up to 80% and do another section 8 rental property.
If he has a line of credit on his residence, he pays himself back with the line of credit from the first investment property, and then borrows another $100,000 and does another one.

This is one of the ways that I built a portfolio of buy and hold properties after I had profits from my San Antonio flips in my first few years in real estate.

So, if you are thinking about buying San Antonio wholesale property, I recommend that you find a 10 year expert in the business who not only can sell you a property, but has experience in building a cashflowing portfolio for himself.

April 5, 2016May 29, 2021

Why Investors Who Obsess About Interest Rates and ROI Lose Money

Obviously it is important in San Antonio real estate investing to make a good return on your investment dollar. In my 15 years of investing in San Antonio investment property, I have averaged about $8000 profit on flips on under market value properties, and approximately 12% ROI on San Antonio buy and hold deals.

However, if you as an out of state property investor obsess too much on ROI, how much you will make on that flip, or the interest rate that you are paying on your borrowed capital, it can talk you out of doing profitable deals, and that is a big mistake.

In the last month, I have seen investors talk themselves out of doing profitable deals – I am talking about clearing $10,000 on a flip in particular. This under market value San Antonio property is a good example:

- Address: 2229 W Hermosa Dr. San Antonio, TX 78201
- Year Built: 1948
- Description: Under market value property sale in hot north of downtown neighborhood, 2 beds 1 bath, 769 sqft, built: 1948, lot size: .14 acres yearly taxes: $1,200.00, estimated yearly insurance: $800.00, estimated repairs on this distressed sale.
- Rehab Option#1: 35K, includes new HVAC, converting to 3 BR, updated kitchen, flooring, paint in/out, exterior skirt, roof, room addition, appliances, paint out door storage exterior, trash, lawn maintenance.
- Max After Repair Value: $139,000.00 on this fixer upper with owner financing, comps are for 3/1.
- Rehab Option #2: 15k with Owner Finance ONLY – AC, flooring paint in and out $109,000 ARV.
- Cash Price: $69,900 firm.

On this San Antonio flip deal, the investor will make in the area of $10,000 on a flip, or maybe $6000 or $7000 if they have to borrow hard money. Now some people think that is too little to bother with. Oh my goodness! They are so wrong. When I first started in San Antonio real estate investing, I did 50 houses in my first year.

We’ve had investors borrow millions from private investors and they split the profits 50/50 when each project was completed. Now I only ended up making $3000 or $5000 per flip when I sold them. But I didn’t worry about such a ‘small’ amount of profit, because I made – get this – $100,000 in my first year in San Antonio wholesale property investing! And I re-invested 80% of that profit.

Let me be clear: Investors who laugh off making $5000 or $10,000 on a San Antonio flip are being foolish. True, if you only do 1 flip a year, you are not going to be able to build capital very quickly. So, you need to do at least 4 per year, or ideally, 10 or more. Then you take that $5000 or $10,000 per deal and invest it again into San Antonio flips or San Antonio buy and holds.

I have dealt with well-meaning but short-sighted investors who actually were going to scuttle $10,000 profit flip deals because they were going to possibly have to borrow 14% rate hard money. Of course it is smart to borrow the cheapest capital that you can – ideally private money or a line of credit on a piece of property you own.

Failing that, hard money is often the only option. While it is true that you will pay high interest and fees – possibly up to $4000 per deal – why on earth would you nix doing deals if you still stand to profit? Which is better, making $6000 or making zero? I know what I’ll go with!

At the end of the day in San Antonio real estate investing, focus on your total profit, not on the interest rate and fees you are paying. If you are making $5000 on a flip, I’d be happy with it and do 10 more this year.

Update: This week we had a buyer walk away from a deal that would have made her $8000 or so because she refuses to use hard money. So, rather than make $8000, she makes nothing.

January 10, 2016May 6, 2021

Do You Have a $200,000 Salary and Hate Your Life? Buy Under Market Value Properties

I can’t tell you how many people I run into in my under market value properties career who have good jobs and hate their lives.

That is, they make $200,000 or more per year and yet, they work 60 hours per week, sit in dull cubicles for years and years, and wish they had the time to do what they want to do.

The truth is, most of us have been conned into thinking that the ONLY way to live in America is to trade time for money.

Passive income is the way to go – with under market value properties – at least 20% below market value. Who wants to sit bored in a cubicle or office for most of their working life? It’s a form of slavery, even if you are well paid.

But a guy or gal like you…..you make $200,000 per year or more out there in California or Washington….you most likely have some capital stored up so that you can buy under market value investment properties, and STOP trading your time for money. This type of out of state investment property is perfect for you. Passive income fast.

Here is a quick plan to stop trading your time for money TODAY. I am going to assume you have some capital to work with (if you don’t, go find some private investors to borrow money from.

If you live in a high cost area, strongly consider buying an out of state investment property.

This under market value investment property is one that I have scouted out carefully in a very hot part of 78201, which is north of down town San Antonio. It is seeing a lot of young professionals moving in and property values are shooting up. There is a good chance you could get a young professional buying this under market value property from you, or a hardworking blue collar family:

Address: 2229 W Hermosa Dr. San Antonio, TX 78201
Year Built: 1948
Description: Distressed property sale, 2 beds 1 bath, 769 sqft, lot size: .14 acres yearly taxes: estimated repairs: 35K (convert to 3 BR).
Max After Repair Value: $129,000.00.
Cash Price: $69,900 firm.
Exit Strategy: Owner finance 10% interest rate, $5000 down, 30 year note, $1100 per month PITI. Plenty of positive cash flow.
10% ROI no maintenance.

Here’s how you can retire early in one of the best cities to invest in real estate – Buy under market value properties just like these with cash or with borrowed cash. I do $35,000 in rehab. Then resell the house with owner financing to a qualified buyer. Simple!

The above out of state investment property will make you $1000-1100 per month, assuming you fund the deal with cash from your $200,000 or whatever job. In time you will be able to financially retire.

That’s it. Buy, rehab, resell, and collect the cash flow. It IS that simple. Lather, rinse and repeat.

January 7, 2016January 11, 2016

Earning 11% ROI on Under Market Value Property for Building Wealth

New and even experienced investors often ask me how I was able to build monthly positive cash flow of more than $40,000 per month – without starting with much capital.

There are many factors involved, but at the end of the day, my strategy is very simple for real estate cash flow:

I buy 20% under market value investment properties in San Antonio, Texas.
I perform about $25,000 in rehab in 45 days, and then resell with owner financing to earn a 10-12% ROI.

I also have a great good luck charm named Teddy, which you will learn about if you stick around long 🙂

Now these are not very expensive houses; after all, this is San Antonio TX. My typical property is $60,000 or so wholesale, which is then resold with owner financing for $100,000 or so.

Each one of my below market value properties earns me ‘only’ $400 or $700 per month in positive cash flow. Some investors – especially those on the West Coast – might snicker at such a ‘small’ return.

However, one thing I have learned over 15 years in real estate investing in under market value properties is this: I would much rather do 100 ‘small’ deals per year, than 1 or 2 ‘big’ deals.

My little, bitty 3 bedroom houses for $100,000 or less may not look like much, but when you have 50 of them owned in cash, you are talking serious, positive cash flow. And that is what allowed me to financially retire at 28.

These little houses are becoming even more valuable in San Antonio these days, given how the economy is growing. The north side of downtown, especially 78201 zip code, is appreciating very well. I love to buy fixer upper distressed properties in this area – under market value.

This house 2229 W Hermosa, San Antonio TX 78201 is a typical hot deal north of downtown that will do very well for the savvy investor.

After I do $35,000 in rehab on this below market value property, I will resell it for the investor with owner financing. I’ve bought and sold hundreds of houses in this area, and I know that I can resell this property with owner financing for $129,000. That will generate approximately $1,000 per month in positive, long term cash flow for the investor.

It is on under market value deals just like this one that I have built a large nest egg of real estate cash flow that made me financially retire so young.

January 5, 2016January 14, 2016

Buy and Hold or Flip Out of State Investment Properties?

Anyone who is involved in real estate investing for long will eventually ask him or herself a critical question:

Should I buy and hold or flip San Antonio investment properties?

Flipping houses has become very popular in the last decade, probably due to all the Flip That House type shows on TV. On the other hand is buy and hold investing, which is probably the oldest way to make money in real estate investing.

So which should you do? Well, it depends!

Overview of Flipping Houses

The basic definition of flipping a house is buying a property under market value (20-50% usually), improving it, and then reselling it for a profit. To gain maximum financial advantage, the goal is to sell the house as quickly as possible after the rehab.

A good house flipper in under market value houses will try to buy, rehab and resell the under market value property as quickly as he can. The reason is that holding a piece of real estate without any income coming in costs money. Some of ‘soft costs’ of holding a flip property include:

Property taxes
Utilities
Hard money finance charges
Any repair and maintenance

House flippers try to hold the property as little as possible. In the flips I have done in the last year, I held my San Antonio investment properties for about three months each.

Overview of Buy and Hold Investing with Out of State Investment Properties

This type of investing with below market value properties involves purchasing the under market value house, making some amount of improvements, and then keeping the house for rental or owner finance income. To pay for the monthly costs of holding the property in most cases, the house will be rented to a tenant. Typical holding costs for a buy and hold property are:

Financing
Taxes
Utilities
Property taxes
Maintenance costs

It should be noted here that there are other forms of buy and hold investing, which is the type we usually do. That is, we buy and hold the property in cash, and owner finance the under market value house to a qualified buyer.

The advantage of this type of buy and hold investing with out of state investment properties is that there are no maintenance costs. Also, without a mortgage, this type of under market value investing is usually less risky, especially in a downturn.

Pros of Flipping

Short term profits: You can, ideally, realize your profits in a few weeks or months. Your cash will not be tied up in an under market value property for very long, and you can move on to another deal.
If you can flip a house in under six months and make at least 15% profit, you have done very well.
Good ROI, if you know how to rehab an under market value property without overdoing it.
No renters or landlord headaches.

Cons of Flipping

Making money at it takes a lot of work. The reality shows make it look easy. Flipping a house and making money isn’t as easy as it looks.
Unexpected costs: Anyone who rehabs under market value houses for a living will run into unexpected additional costs. This can be especially damaging when you are trying to make quick profits.
Rehab problems: You might think it will take a week to do that roof, but it takes six weeks. That adds to your time line and when you will be able to make a profit.
In an appreciating market, you may have trouble finding under market value houses that are truly flippable.

Pros of Buying and Holding

Creating wealth: You can really build wealth over time with buy and hold investing, especially with owner financing rather than renting under market value property. Real estate also will generally increase in value over time, which can make you very well off.
Steady cash flow: If you own several properties that each make $800 per month, this is a nice way to earn a living.
No worry about selling short term: You can usually wait out the inevitable downturn in the market as you are enjoying the cash flow from the property. A flipper could end up in trouble if the market crashes in the middle of a project.

Cons of Buying and Holding

Market changes: If you need cash fast, you could need to sell your under market value property but the market dipped so you lose money.
Legal problems: Tenants can be a pain in the neck, which is why we mostly owner finance our houses. We only carry the note on our houses, so we have no tenant issues at all.
Struggles with being a landlord: A buy and hold rental property can turn into a negative cash flow situation easily if you do not buy the property at the right price, and if there are expensive repairs. Vacancies are another big problem in bad markets. Again, that is the plus of investing with owner financing and buying cash – no mortgages and no tenants.
Property management responsibilities for rentals

Overall, in our experience, we prefer buying and holding with owner finance over flipping. Flipping is great if we need to get more cash to buy and hold more houses, but it is not a long term wealth creation solution for us for Texas cash flow.

December 29, 2015May 27, 2016

228 Yucca, San Antonio TX 78203

Address: 228 Yucca, San Antonio, Texas 78203
Year Built: 1950
Description: 3 beds, 1 bath, 1056 sqft, large lot: .17 acres. Property sits on a beautiful large lot, plenty of room for growth or a wonderful playground and garden.
Max After Repair Value: $99,900
Cash Price: $34,800
Exit Strategies: Retail sale w/40k in repairs: 99K with FHA, VA, Conventional; owner finance w/40K in repairs: 5k down, $995 monthly P/I, 30 year amortization, 10% interest, Price: 99K; rent: $995 monthly with 40K in repairs.
Notes: We recommend that you owner finance this house because you will have no maintenance expenses. ROI will be ~10%.
Contact us for more information or to make offer.
Sold and Rental Comps: Rented Comps 228 Yucca sold comps 228 Yucca

More Pictures:

November 19, 2015January 14, 2016

3 ways to stay positive in the midst of a storm

Key Takeaways

Listening to positive and inspiring people keeps your spirits up in rough times.
Staying positive can lead to new business opportunities.
Stay away from negative real estate investors especially online forums.

This article now appears in Inman Select.

Maintaining a positive attitude in San Antonio investment properties has been key to my long-term success since 2001. My mentors taught me that staying relentlessly positive in my investing would propel me through rough waters.

And have I ever been through some rough Class-4 rapids in my day.

But let’s back up for a second. Before the real estate crash of 2008, I focused largely on $1 million homes in San Antonio, Texas, which I rehabbed and resold for a 30 percent profit. Those were the days — rehab a house in four months and sell it for a $325,000 profit.
Learn from tough times

Then one morning in 2008, I called my local bank to borrow an additional $250,000 for two rehabs. The voice on the other end of the phone said, sorry — we aren’t loaning money on under market value San Antonio investment properties anymore.

What? And that was when it all started to fall apart. It was nearly impossible to borrow money, though I owned 100 houses free and clear and had an eight-year success record.

But I had a bigger problem. I was stuck with $1 million worth of under market value houses that I couldn’t sell. No one could qualify for mortgages, and the market crash had dropped their value to under $800,000.

I had many sleepless nights. Despair crept up on me as my bank account shrank.
Focus on positive speakers

Even though I was losing money left and right at this time, I still managed to keep a positive, can-do attitude with my out of state investment properties.

That’s easy to say, but how did I do it? I listened every day to positive speeches and sermons from famous speakers and pastors.

Being a Christian, I listened every day to Joel Osteen; I found his uplifting sermons about prosperity in all aspects of life to be a huge lift for me.

Also, I listened daily to the leader of Christian Business Leaders International, Bob Harrison, who is also known as the No. 1 increase authority in America.

Harrison has been through trying financial times as well. But his optimism has carried him through, and he is now one of the leading business speakers in the world.
Lead with optimism and find new opportunities

Maintaining an optimistic outlook didn’t just get me through the market crash. It also opened new horizons for me in real estate investing.

I discovered something shocking: the expensive $1-million houses are the riskiest investments. When the market dips, the demand for those homes plummets, as do the prices.

On the other hand, my little, bitty $50,000 three-bedroom, one-bathroom out of state investment property sells just the same no matter what’s happening in the market.

The demand was always there for these small under-market-value houses, and each one made — and continues to make — me $600 to $800 per month on owner financing.

So, the crash and staying positive throughout it led me to an amazing new business opportunity — buying and selling distressed homes and owner-financing them. Even better, the crash allowed me to snatch up 100 of these houses for about $20,000 each, and they now sell for $50,000 each or more.
The crash and staying positive throughout it led me to an amazing new business opportunity.
3 tips for staying positive

It’s vital to maintain a positive, can-do spirit in your real estate investing, no matter what. This is what makes you stick to it when other investors give up. Here’s my advice:

1. When things are bad, listen to uplifting and motivational speakers

Find positive business mentors online that can inspire you and keep you motivated. Zig Ziglar is another great one.

2. Remove yourself from negative environments, especially online forums

I love the Internet, but there is a lot of negativity on some real estate investing websites. Many people just want to moan about how bad things are — it makes them feel better.

I don’t have even one second of time for this kind of talk. Associate with positive, can-do real estate investors only. And by the way, I made plenty of money in real estate without a website or ever being online at all.

3. Shadow a successful, positive mentor

Whatever city you are in, you can locate a good real estate mentor to inspire you. Why would he or she talk to you? Because you have something to offer.

Offer to help them with hanging signs, making calls or doing office work in exchange for learning from them. I met most of my mentors at real estate meetings in San Antonio, and their positive attitude rubbed off on me.

Maintaining an optimistic outlook in down times led me to even better real estate success in under market value properties, so always keep your chin up.

November 16, 2015January 12, 2016

Turn 3 Properties Into 6 or More in 5 Years With Your IRA

I am a strong believer of investing in under market value real estate property with all cash and owner financing them. When you buy distressed properties with all cash and finance them to qualified buyers, there is one overwhelming advantage with these below market value investments:

You have no mortgage on your property investment, so if the property is ever vacant for any reason, you do not have overwhelming financial pressure bearing on you. Over leveraged real estate investors were a major factor in the real estate meltdown five years ago.

Of course, on the other side of the ledger, you cannot purchase as many distressed sale properties as you could if you leveraged your capital and use 20% down conventional financing. This is always a valid concern for people with limited capital to invest in the best San Antonio investment property.

Still I would like to illustrate how the smart and patient investor can take three fixer upper homes and turn it into 6 and possibly more in 5 years, assuming you have no additional cash to invest after the initial investments. The illustration below assumes you owner finance the houses, so you do not have any maintenance costs. This is our tried and true positive cash flow model!

That $275,000 in Your IRA

I run across many aspiring investors that have savings and IRA assets of $275,000 or so. In current market conditions in San Antonio TX, that $275,000 can fund approximately three solid distressed sale properties in cash. Let’s illustrate with three houses we have right now:

Property 1 – 262 Bogle St., 78207: $50,000 + $30,000 rehab = $84,500 investment + $2500 closing costs, $2000 commissions = $89,000 total investment.

Total Owner Finance Cash Flow Per Year: $8940 ($745 per month after tax/ins.)

Property 2 – 109 Llano, 78223: $29,900 + $40,000 rehab = $69,900 investment + $2100 closing costs, $2000 commissions = $74,000 total investment.

Total Owner Finance Cash Flow Per Year: $9,000 ($750 per month after tax/ins.)

Property 3 – 1027 Sams Dr., 78221: $59,900 + $40,000 rehab = $109,000 investment + $3000 closing costs, $3000 commissions = $115,000 total investment.

Total Owner Finance Cash Flow Per Year: $12,000 ($1095 per month after tax/ins.)

Total Income from 3 Properties Per Year: $29,940

The next step would be to bank that positive cash flow from your three properties for up to five years. At the five year mark, you will have approximately $149,700 in your tax deferred IRA.

At this point, how many property investments you can buy depends upon the state of the San Antonio real estate market. Right now, the prices are higher because unemployment is lower, and more rehab is necessary to sell the houses. However, there is a high probability that in the next five years, there will be a substantial downturn in real estate prices.

In the last crash from 2008-11, the price of my distressed houses dropped from $50,000 median to $30,000 median. I was able to purchase many more homes during the downturn.

If the prices go down to approximately $35,000 per property plus $10,000 in rehab (possible in a slower economy given people simply want any house to live in), you could buy at least 3 more houses, and possibly 4. With three more houses, you would have approximately $45,000 in total cash flow from your grand total of six houses!

If the prices stay the same five years from now (which in my 15 year experience is very unlikely), you could purchase at worst two more properties, with a total cash flow from your five properties of $40,000 or so.

In either case, that cash can be banked in your IRA to buy more of the best San Antonio investment property whenever market conditions warrant buying more.

I am waiting until the next downturn to take my banked cash flow from my current portfolio to buy at least another 20 houses. You can and should do the same thing!

November 11, 2015November 11, 2015

2513 W Poplar St, San Antonio, Texas 78207

Address: 2513 W Poplar St, San Antonio, Texas 78207
Description: Fixer upper home, great opportunity to own cash flow property, Booming Texas Market, 3 beds, 1 bath, 1000 sqft.
Estimated Repairs on Distressed Property Sale:10K, includes interior texture/paint, new HVAC, minor flooring, minor foundation, plumbing/electrical up to code. Max ARV 79K with owner financing, Price: 45K cash.
Exit Strategy: Owner Finance for positive cash flow with 10K repairs: 5k down, $800 monthly P/I, 30 year amortization, 10% interest, Price: 79K, can sell note after 1 year.
Positive Cash Flow: $700 per month with no maintenance. Consider this investment in property!

November 10, 2015January 12, 2016

Why You Should Ignore Popular Advice About Real Estate Investing

This article now appears on Inman News.

Key Takeaways

Ignore what your eyes tell you about property’s appearance: study the numbers, cost of repairs and the area.
Pay 20 percent to 30 percent under market value or move on to another deal.
Buying in poorer areas means less competition for the deal, and it could make you 12 percent ROI or better.

There are so many myths out there about purchasing distressed properties in what people often call “problem” neighborhoods. Raise your hand if you ever heard this before: “Don’t ever buy a real estate investment in a bad neighborhood.”

I hear it all the time. It’s baloney. Many of the best San Antonio investment properties are in so-so areaa.

If you just trust your eyes and only buy in nice areas, your chances for making money are slim. For instance, a major real estate investing company is a perfectly good organization that focuses on selling rental properties and related training.

In a recent blog, however, the company said this: “The whole idea of buying property for investment is to buy in hot or an up-and-coming neighborhood. Don’t waste your time or money investing in a property located in a poor or declining area.”

It is correct in the sense that you should definitely buy in an up-and-coming neighborhood. I do that all the time when I buy under-market value houses in San Antonio.

I study the market and find the neighborhood near a hot area that I think is going to get hot next, and I snatch up $40,000 houses for cash before they go up to $80,000. I make 10 percent to 15 percent a year on most of these best San Antonio investment properties.

However, the rest of the quote is questionable: “The whole idea of buying property for investment is to buy in hot or an up-and-coming neighborhood.” If this means paying anywhere near market value, I don’t agree at all. That’s how investors end up making zero cash flow.

I will buy a 20 percent to 30 percent under-market-value house in a hot, affordable neighborhood (under $80,000 wholesale is my strategy). That makes a lot of sense. That type of deal will produce excellent, positive cash flow if you don’t over rehab.

For example, a California investor bought this three-bedroom, one-and-a-half bathroom house in a rising area north of downtown San Antonio:

The investor bought it from me for $62,000 — approximately 30 percent under market value — and did $10,000 in repairs. He resold it with seller financing with $5,000 down, $89,900 price, $937 per month property, taxes and insurance (PITI). That’s 12 percent ROI.

This company might consider this a poor neighborhood, but my investor doesn’t have to repair the house, and he makes 12 percent on his money. What a great out of state real estate investment.

“Don’t waste your time or money investing in a property located in a poor or declining area.” I don’t buy in declining areas, but what defines a poor area?

Does that include households that make $2,500 or $3,000 per month? That’s 90 percent of the owner-finance buyers that helped me to financially retire before I was 30 on distressed sales.

The majority of the neighborhoods that I invest in are considered poor areas, but they are on the way up, as the city is pouring revitalization dollars into parks, green space, walking paths and more.

For instance, this three-bedroom, one-bathroom home west of downtown is in a so-so area:

Sure, it’s not pretty, but smart investors ignore what their eyes tell them and study the numbers, the nature of the repairs and the area. The repairs on this house to resell it were minor, and the nearby area has seen millions and millions of dollars in new construction and city funding.

The investor purchased it from me for $29,900 — about 30 percent under market value. After $7,000 for paint inside and out, foundation repair and clean up, it sold with seller financing for $5,000 down, $55,000, $550 per month PITI. That’s 11 percent ROI.

And this is in an area that most investors would consider poor. It is, however, on the way up.

Of course, you cannot simply go into any poor area and start buying cheap, distressed sales with positive cash flow. That’s also a path to ruin. But if you only purchase investment properties in nicer areas, you will be fighting a lot of investors for any of the few deals that generate cash flow. That drives prices up to market value and beyond, and you can kiss your profits good bye.

Invest in distressed, fixer upper homes or under market-value properties for true positive cash flow, but be certain to:

Carefully study the market to learn which area is near a hot area and will likely go up in value in the next year.
Get the property for at least 20 percent under market value to leave room for a profit of at least 25 percent on a flip and 10 percent ROI on a buy-and-hold.
Buy out of state investment properties in areas that are less expensive, especially in B and C neighborhoods.
Owner finance the property to a qualified buyer — save yourself thousands in rehab costs. Do enough to sell the house and leave the rest to the new owner.

If you invest carefully in properties in poor or bad areas, you will end up with cash flow that all the poser investors simply dream of.